All U.S. taxpayers with a financial interest in, or signature or other authority over, a foreign bank account are required to file the Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (commonly known as the “FBAR” form) annually by June 30. Significant criminal and civil penalties can be imposed for the failure to do so. In addition, the Foreign Account Tax Compliance Act (“FATCA”) now requires U.S. taxpayers to report certain foreign assets on Form 8938, Statement of Specified Foreign Financial Assets, that must be filed annually with personal tax returns.
The Internal Revenue Service (“IRS”) currently offers the Offshore Voluntary Disclosure Program, an amnesty program designed to encourage U.S. taxpayers with undisclosed foreign bank accounts to come into compliance with U.S. tax laws and avoid criminal prosecution. To date, more than 35,000 Americans have taken advantage of the various offshore voluntary disclosure programs offered by the IRS since 2009. Currently, there is no deadline for participation in the 2012 program, although the IRS has stated that it could end the program, or modify its terms, at any time.
Meanwhile, the IRS and Justice Department continue their global enforcement campaign against foreign banks and tax haven jurisdictions that are believed to facilitate international tax evasion by U.S. taxpayers with secret bank accounts.
FATCA also requires foreign financial institutions (a broadly defined term that includes both traditional banks and non-bank financial institutions, including hedge funds) to register with the IRS and annually disclose to the IRS the names and account information of U.S. accountholders. Foreign financial institutions that refuse to register and make such disclosures are subject to a 30 percent withholding tax on U.S. source payments. The IRS issued final regulations implementing the FATCA regime in January 2013, and FATCA’s withholding and disclosure provisions are scheduled for implementation starting on January 1, 2014.
Blank Rome's offshore tax compliance team has significant experience in advising foreign financial institutions and individuals as to their obligations under U.S. tax law and resolving potential areas of exposure. To learn more about our offshore tax compliance capabilities, please click here.
Blank Rome’s FBAR and FATCA Compliance team understands the complex challenges of the foreign asset reporting regulations, the IRS voluntary disclosure program, and disclosure and withholding requirements imposed on foreign financial institutions under FATCA. Our group includes lawyers who concentrate their practices on domestic and international tax law, white collar defense and investigations, federal tax controversies, and banking regulations. The team also publishes a blog that covers latest developments in the FBAR and FATCA field at www.taxcontroversywatch.com.